BILL ANALYSIS AB 2244 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2244 (Feuer) As Amended August 20, 2010 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |50-25|(June 1, 2010) |SENATE: |22-11|(August 25, | | | | | | |2010) | ----------------------------------------------------------------- Original Committee Reference: HEALTH SUMMARY : Requires guaranteed issue of health plan and health insurance (collectively carriers) products for children beginning in January 1, 2011. Conforms provisions related to guaranteed issue with federal law, as specified, and any rules or regulations adopted pursuant to federal law. The Senate amendments : 1)Delete all provisions referencing carrier coverage for adults over 19 years of age. 2)Prohibit preexisting condition provisions of a carrier policy or contract from excluding coverage for a period beyond six months following the individual's effective date of coverage and permit them to only relate to conditions for which medical advice, diagnosis, care, or treatment, including prescription drugs, was recommended or received from a licensed health practitioner during the six months immediately preceding the effective date of coverage. 3)Prohibit, not withstanding 1) above, a carrier policy or contract offered to a small employer from imposing any preexisting condition provisions upon any child under 19 years of age. 4)Permit a carrier that does not utilize a preexisting condition provision to impose a waiting or affiliation period, not to exceed 60 days, before the coverage issued becomes effective. Prohibit, during the waiting or affiliation period premiums from being charged to the enrollee or the subscriber. 5)Require a plan, in determining whether a preexisting condition provision or waiting or affiliation period applies to any AB 2244 Page 2 person, to credit the time the person was covered under creditable coverage, provided the person becomes eligible for coverage under the succeeding carrier contract within 62 days of termination of prior coverage, exclusive of any waiting or affiliation period, and applies for coverage with the succeeding carrier contract within the applicable enrollment period. Require a carrier to also credit any time an eligible employee must wait before enrolling in the plan, including any affiliation or employer-imposed waiting or affiliation period. 6)Require, if a person's employment has ended, the availability of health coverage offered through employment or sponsored by an employer has terminated, or an employer's contribution toward health coverage has terminated, a plan to credit the time the person was covered under creditable coverage if the person becomes eligible for health coverage offered through employment or sponsored by an employer within 180 days, exclusive of any waiting or affiliation period, and applies for coverage under the succeeding carrier contract within the applicable enrollment period. 7)Permit, in addition to the preexisting condition exclusions in 2) above and the waiting or affiliation period authorized in 4) above, carriers providing coverage to a guaranteed association to impose on employers or individuals purchasing coverage who would not be eligible for guaranteed coverage if they were not purchasing through the association a waiting or affiliation period, not to exceed 60 days, before the coverage issued subject becomes effective. Prohibit, during the waiting or affiliation period, no premiums to be charged to the enrollee or the subscriber. 8)Require an individual's period of credible coverage to be certified pursuant to the federal Public Health Services Act. 9)Prohibit a carrier policy or contract issuing group coverage from imposing a preexisting condition exclusion to a condition relating to benefits for pregnancy or maternity care. 10)Prohibit a carrier policy or contract that covers three or more enrollees from excluding coverage for any individual on the basis of preexisting condition provision for a period greater than six months following the individual's effective date of coverage. Permit preexisting condition provisions AB 2244 Page 3 contained in carrier policies and contracts to relate only to conditions for which medical advice, diagnosis, care, or treatment, including use of prescription drugs, was recommended or received from a licensed health practitioner during the six months immediately preceding the effective date of coverage. 11)Prohibit a carrier contract that covers one or two individuals from excluding coverage on the basis of a preexisting condition provision for a period greater than 12 months following the individual's effective date of coverage or the carrier policy or contract to limit or exclude coverage for a specific enrollee by type of illness, treatment, medical condition, or accident, except for satisfaction of a preexisting condition clause. 12)Prohibit a carrier policy or contract offered for group coverage from imposing any preexisting condition provision upon any child under 19 years of age. 13)Prohibit a carrier policy or contract for individual coverage that is not grandfathered within the federal Patient Protection and Affordable Care Act (PPACA), as specified, from imposing any preexisting condition provision upon any child under 19 years of age. 14)Delete the definitions for "Individual," "In force business," "New business," Rating period," "Risk-adjusted individual risk rate," "Risk adjustment factor," and "Risk category." 15)Define "Individual grandfathered plan coverage" as health care coverage in which an individual was enrolled on March 23, 2010, consistent with PPACA, as specified, and any rules or regulations adopted pursuant to PPACA. 16)Define "Initial open enrollment period" as the open enrollment period beginning on January 1, 2011, and ending 60 days thereafter. 17)Define "Late enrollee" as a child without coverage who did not enroll in a health care service plan contract during an open enrollment period because of any of the following: a) The child lost dependent coverage due to termination or change in employment status of the child or the person AB 2244 Page 4 through whom the child was covered; cessation of an employer's contribution toward an employee or dependent's coverage; death of the person through whom the child was covered as a dependent; legal separation; divorce; loss of coverage under the Healthy Families Program, the Access for Infants and Mothers Program, or the Medic-Cal Program; or adoption of the child; b) The child became a resident of California during a month that was not the child's birth month; c) The child is born as a resident of California and did not enroll in the month of birth; or, d) The child is mandated to be covered pursuant to a valid state or federal court order. 18)Define "Open enrollment period" as the annual enrollment period, subsequent to the initial open enrollment period, applicable to each individual child that is the month of the child's birth date. 19)Define "PPACA" as the federal Patient Protection and Affordable Care Act (Public Law 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), and any subsequent rules or regulations issued pursuant to that law. 20)Revise the definition of "Pre-existing condition exclusion," with respect to coverage, to mean a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the date of enrollment of the coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that date. 21)Revise the definition of "Responsible party for a child," as an adult having custody of the child or with responsibility for the financial needs of the child, including the responsibility to provide health care coverage. 22)Define "Standard risk rate," as the lowest rate that can be offered for a child with the same benefit plan, effective date, age, geographic region, and family status. 23)Delete age and family size categories used to determine AB 2244 Page 5 premium rates. 24)Require, during each open enrollment period, every carrier offering carrier policies or contracts in the individual market, other than individual grandfathered carrier coverage, to offer to the responsible party for the child coverage for the child that does not exclude or limit coverage due to any preexisting condition of the child. 25)Prohibit a carrier offering coverage in the individual market from rejecting an application for a carrier policy or contract from a child or filed on behalf of a child by the responsible party during an open enrollment period or from a late enrollee during a period no longer than 63 days from the qualifying event listed, as specified. 26)Prohibit a carrier, except to the extent permitted by federal law, rules, regulations, or guidance issued by the relevant federal agency, from conditioning the issuance or offering of individual coverage on any of the following factors: a) Health status; b) Medical condition, including physical and mental illness; c) Claims experience; d) Receipt of health care; e) Medical history; f) Genetic information; g) Evidence of insurability, including conditions arising out of acts of domestic violence; h) Disability; and, i) Any other health status-related factor as determined by the Department of Managed Health Care (DMHC) or the California Department of Insurance (CDI). 27)Prohibit the provisions in this bill from applying to a carrier policy or contract providing individual grandfathered plan coverage. AB 2244 Page 6 28)Require when a responsible party for a child submits a premium, based on the quoted premium changes, and that payment is delivered or postmarked, whichever occurs earlier, within the first 15 days of the month, coverage under the carrier policy or contract is to become effective no later that the first day of the following month. 29)Require, when the payment referenced in 28) above is neither delivered nor postmarked until after the 15th day of the month, coverage is become effective no later than the first day of the second month following delivery or postmark of the payment. 30)Prohibit a carrier offering coverage in the individual market from rejecting the request of a responsible party for a child to include that child as a dependent on an existing carrier policy or contract that includes dependent coverage during an open enrollment period. 31)Prohibit the provision in this bill from being construed to prohibit a carrier offering coverage in the individual market from establishing rules for eligibility for coverage and offering coverage pursuant to those rules for children and individuals based on factors otherwise authorized under federal and state law for carrier policies and contracts in addition to those offered on a guaranteed issue basis during an open enrollment period to children or late enrollees. 32)Prohibit a carrier, other than those providing individual grandfathered coverage, from imposing a preexisting condition provision on coverage, including dependent coverage, offered to the child. 33)Prohibit the provisions in this bill from being construed to prevent a carrier from offering coverage to a family member of an enrollee in grandfathered carrier coverage consistent with PPACA, as specified. 34)Prohibit the provisions of this bill from applying to carrier policies or contracts for coverage of Medicare services pursuant to contracts with the United States government, Medicare supplement contracts, Medi-Cal contracts with the State Department of Health Care Services, plan contracts offered under the Healthy Families Program, long-term care AB 2244 Page 7 coverage, or specialized carrier policies or contracts. 35)Require, upon the effective date of the provisions of this bill, a carrier to fairly and affirmatively offer, market, and sell all of the carrier's policies and contracts that are offered and sold to a child or the responsible party for a child in each service area in which the carrier provides or arranges for the provision of health care services during any open enrollment period, to late enrollees, and during any other period in which state and federal law, rules, regulations, or guidance expressly provide that a carrier is prohibited from conditioning an offer or acceptance of coverage on any preexisting condition. 36)Prohibit a carrier from directly or indirectly engaging in the following activities: a) Encourage or direct a child or responsible party for a child to refrain from filing an application for coverage with a carrier because of the health status, claims experience, industry, occupation, or geographic location, provided that the location is within the carrier's approved service area, of the child; and, b) Encourage or direct a child or responsible party for a child to seek coverage from another carrier because of the health status, claims experience, industry, occupation, or geographic location, provided that the location is within the carrier's approved service area, of the individual or child. 37)Prohibit a carrier from directly or indirectly, entering into any contract, agreement, or arrangement with a solicitor that provides for or results in the compensation paid to the solicitor for the sale of a carrier policy or contract to be varied because of the health status, claims experience, industry, occupation, or geographic location of the child. 38)Permit a carrier from using the following characteristics of an eligible child for purposes of establishing the rate of the carrier policy or contract for that child, where consistent with federal regulations under PPACA: a) Age; AB 2244 Page 8 b) Geographic region; and, c) Family composition, plus the carrier policy or contract selected by the child or the responsible party for the child. 39)Require, from the effective date of the provisions of this bill to December 31, 2013, inclusive, rates for any child applying for coverage to be subject to the following requirements: a) Prohibit, during any open enrollment period or for late enrollees, the rate for any child due to health status from being more than two times the standard risk rate for a child; b) Require the rate for a child to be subject to a 20% surcharge above the highest allowable rate on a child applying for coverage who is not a late enrollee and who failed to maintain coverage with any carrier for the 90-day period prior to the date of the child's application. Require the surcharge to apply for the 12-month period following the effective date of the child's coverage; c) Permit, if expressly permitted under PPACA and any rules, regulations, or guidance issued pursuant to PPACA, a carrier to rate a child based on health status during any period other than an open enrollment period if the child is not a late enrollee; d) Permit, if expressly permitted under PPACA and any rules, regulations, or guidance issued pursuant to PPACA, a carrier to condition an offer or acceptance of coverage on any preexisting condition or other health status-related factor for a period other than an open enrollment period and for a child who is not a late enrollee; e) Require, for any individual carrier policies or contracts issued, sold, or renewed prior to December 31, 2013, the health plan to provide to a child or responsible party for a child a notice that states the following: "Please consider your options carefully before failing to maintain or renew coverage for a child for whom you are responsible. If you attempt to obtain new AB 2244 Page 9 individual coverage for that child, the premium for the same coverage may be higher than the premium you pay now." f) Require a child who applied for coverage between September 23, 2010, and the end of the initial open enrollment period to be deemed to have maintained coverage during that period; g) Require, effective January 1, 2014, except for individual grandfathered carrier coverage, the rate for any child to be identical to the standard risk rate; and, h) Permit carriers to require documentation from applicants relating to their coverage history. 40)Require all carrier policies or contracts offered to a child or on behalf of a child to a responsible party for the child to conform to the requirements, as specified and to be renewable at the option of the enrollee or responsible party for a child on behalf of the enrollee except as permitted to be canceled, rescinded, or not renewed. 41)Require any carrier that ceases to offer for sale new individual carrier policies or contracts pursuant to existing law to continue to be governed by the provisions of this bill. 42)Require, except as authorized under existing law, a carrier that, as of the effective date of the provisions of this bill, does not write new carrier policies or contracts for children in California or ceases to write new carrier policies or contracts for children in California from offering for sale new individual carrier policies or contracts in California for a period of five years from the date of notice to the director of DMHC or the Insurance Commissioner. 43)Permit, on or before July 1, 2011, the Director of DMHC and the Insurance Commissioner to issue guidance to carriers regarding compliance with the provisions in this bill and prohibits guidance from being subject to the Administrative Procedures Act, as specified. Require the guidance to only be effective until the director of DMHC or the Insurance Commissioner adopt joint regulations pursuant to the Administrative Procedure Act. 44)Delete provisions related to risk adjustment factors applied AB 2244 Page 10 to a child. 45)Delete the provisions related to carrier disclosure requirements. 46)Make other technical and clarifying changes. EXISTING FEDERAL LAW : 1)Establishes the PPACA which requires each carrier that offers health insurance coverage in the individual or group market to accept every employer and individual that applies for such coverage. This requirement is known as "guaranteed issue." Permits a carrier to restrict enrollment in coverage to open or special enrollment periods. Requires a carrier to establish special enrollment periods for qualifying events. Requires the federal Secretary of the Department of Health and Human Services to promulgate regulations regarding enrollment periods and qualifying events. 2)Establishes, under PPACA, rating factors for individual and small group health insurance, effective January 1, 2014, that prohibit rates from varying with respect to the particular plan only by the following factors: a) Whether the plan or coverage covers an individual or family; b) The geographic rating area (each state must establish one or more rating areas within the state); c) Age, except that rates are prohibited from varying by more than 3 to 1 for adults, consistent with federal law; and, d) Tobacco use, except that rates are prohibiting from varying by more than 1.5 to 1. 3)Prohibits a carrier from imposing any pre-existing condition exclusion. This provision becomes effective for adults in 2014 and for children on September 23, 2010. 4)Requires carriers to maintain minimum essential health coverage, establishes phased-in tax penalties for failure to maintain such coverage, and allows exemptions from this AB 2244 Page 11 requirement, such as for religious reasons, hardship, or because an individual is low-income. Requires the minimum essential health coverage to take effect on January 1, 2014. This requirement is referred to as the "individual mandate." EXISTING STATE LAW : 1)Licenses and regulates health plans, by the Department of Managed Health Care (DMHC), and health insurers, by the California Department of Insurance (CDI). 2)Does not require guarantee issue or limit the premiums for individuals in the individual health insurance market, except premiums are regulated for individuals eligible under federal law who previously had 18 months of group coverage and who have exhausted COBRA/Cal-COBRA coverage. 3)Establishes requirements for health plans that provide coverage to small employers. Specifically, this body of law: a) Requires health plans to fairly and affirmatively offer, market, and sell health coverage to small employers. This is known as "guaranteed issue;" b) Requires health plans to offer, market, and sell all of the health plan's contracts that are sold to small employers, to any small employers in each service area in which the plan provides health care services. This is known as an "all products" requirement; c) Requires renewal of coverage, at the option of the policyholder, unless there is fraud or nonpayment of premium or the health plan leaves the market. This is known as "guaranteed renewal;" and, d) Restricts a plan's ability to set initial and renewal premium rates to a group of specified risk categories (age, region, family size, and health benefit plan) and allows only a limited premium variance of plus or minus 10 percent from a standard rate based on health status. The limitation on premium variance is referred to as "rate bands." 4)Limits pre-existing condition exclusions to six months from the individuals' effective date of coverage, with a AB 2244 Page 12 requirement that health plans credit policyholders for the time the individual was covered under previous coverage. 5)Prohibits pre-existing condition exclusions of more than 12 months in policies and contracts covering one or two individuals, with a requirement that plans credit enrollees for the time the individual was covered under prior coverage. AS PASSED BY THE ASSEMBLY , this bill was substantially similar to the version passed by the Senate. FISCAL EFFECT : According to the Senate Appropriations Committee, this bill will result in costs of $365,000 to the Insurance Fund for CDI oversight in fiscal year (FY) 2010 through 2011 and is likely to cost in the hundreds of thousands of dollars in FY 2010 through 2011 to the Managed Care Fund for DMHC oversight. COMMENTS : According to the author, the newly enacted federal health care reform law prohibits use of pre-existing condition exclusions for children in the individual market. The author maintains there was a dispute between insurers and the federal government about whether the new federal law requires guaranteed issue and this bill would clarify that for California. According to the author, the new federal law also does not specifically address rating rules in the individual market prior to 2014 or prohibit insurers from refusing to sell to entire market segments. The author maintains that this bill will align California law with the federal health care reform law and will ensure that children cannot be denied health insurance coverage or be charged more because of a pre-existing condition. On March 23, 2010, President Obama signed the PPACA. Among other provisions, the new law prohibits group health plans or individual health insurance carriers from imposing any preexisting condition exclusion on coverage. The rollout of the law begins with children. On September 23, 2010, insurers will no longer be able to exclude children with preexisting conditions from being covered by their family policies. For current policies, that means insurers will have to rescind pre-existing-condition exclusions. Insurers will not have to take the same steps for adults until January 2014. Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916) AB 2244 Page 13 319-2097 FN: 0006747